Penalties and interest charges

The law imposes penalties on partners for:

• failing to lodge a tax return on time and in the approved form (which includes all applicable schedules)
• having a shortfall amount for under-reporting a liability or over-claiming a credit that is caused by:
  • making a false or misleading statement
  • taking a position that is not reasonably arguable
   
• making a statement that is false or misleading in a material particular which does not result in a shortfall amount
• obtaining a scheme benefit
• failing to provide a tax return from which the Commissioner can determine a liability
• failing to keep and produce proper records
• preventing access to premises and documents
• failing to retain or produce declarations.

General interest charge

Partners are liable for interest charges (generally called the 'general interest charge') where they have:

• not paid a tax, penalty or certain other amounts by the due date
• varied their PAYG instalment amount or rate to less than 85% of the amount or rate that would have covered the partner's actual liability on business and investment income for the year.

Shortfall interest charge

Where an assessment is amended because of an increase in tax payable, the due date for payment of the amended assessment is 21 days after the Commissioner gives the notice increasing the liability. Generally the partners are liable to pay a shortfall interest charge calculated from the due date of the original assessment to the day before the issue date of the amended notice of assessment on the increase. The partners will be notified of the amount of the shortfall interest charge and it will be due 21 days after the notice is given. The general interest charge will apply automatically to any unpaid amount of the amended assessment and the shortfall interest charge once the due date has passed.

The shortfall interest charge is calculated at a rate 4% lower than the general interest charge.

The Commissioner may remit all or part of the shortfall interest charge when it is fair and reasonable to do so. For further information, see Shortfall interest charge - fact sheet.

Penalties

In addition to interest charges, penalties may be applied to any tax shortfall.

For example, penalties may apply for a shortfall that arises if reasonable care has not been exercised or there is not a 'reasonably arguable' position.

The Commissioner must explain, in writing, the reasons for a penalty and, if remission of a penalty has been considered but not fully granted, the reasons for the decision.